Reforms to the NSW CTP Green Slip Insurance Scheme February

Reforms to the
NSW Compulsory Third Party
Green Slip Insurance Scheme
February 2013
Contents
1. How the Green Slip Scheme works
2
2. Why the NSW Green Slip Scheme needs to change
3
2.1 Green Slip prices are too high
4
2.2 The Scheme is highly inefficient
6
2.3 Claim frequency and propensity is increasing
7
2.4 Delayed payment of benefits
8
2.5 NSW compared with other states
8
3. Moving to a better Scheme
9
3.1 Principles for reform
9
3.2 Universal cover
9
3.3 First party cover
9
3.4 Payments made sooner, based on need
10
3.5 Simpler claims system
10
3.6 Common law will be retained for some
10
3.7 A simpler Scheme with fewer disputes
10
3.8 Some reform to premiums needed
11
3.9 Lower Green Slip premiums and better outcomes
11
4. Who will benefit from the changes
12
4.1 Injured people with greater than 10% whole person impairment
12
4.2 Other injured persons
12
4.3 Vehicle owners
12
5. Next steps
12
6. Summary of proposed reform
13
Disclaimer
This publication may include some of your obligations under the various legislations that the Motor Accidents Authority administers. To ensure you comply with your legal obligations you must refer to the appropriate
legislation.
Information on the latest laws can be checked by visiting the NSW legislation website legislation.nsw.gov.au
This publication does not represent a comprehensive statement of the law as it applies to particular problems or to individuals or as a substitute for legal advice.
You should seek independent legal advice if you need assistance on the application of the law to your situation.
© MAA NSW
Page: 1
Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme
February 2013
1. How the Green Slip Scheme works
Every year, around five million vehicle owners in NSW purchase a
Currently Green Slips are sold by five competing insurance companies
Green Slip before being able to finalise their vehicle’s registration. The
which operate seven CTP licenses or brands. These are AAMI, Allianz,
Green Slip, or Compulsory Third Party (CTP) insurance, is generally the
CIC-Allianz, GIO, NRMA, QBE and Zurich.
most expensive part of vehicle registration.
These insurers are responsible for setting Green Slip prices and paying
CTP insurance policies cover a vehicle owner for any liability from
out benefits if there is a claim. In NSW, insurers operate competitively
injuries caused by their vehicle, regardless of who was driving it. This
and are allowed to offer different prices within limits, depending on a
includes injuries to passengers, the drivers and passengers of other
vehicle’s risk factors, similar to comprehensive insurance.
vehicles, pedestrians and cyclists.
The Green Slip price is comprised of the CTP premium retained by
Without CTP insurance, the at fault vehicle owner would personally
the insurer to pay claims, a government levy (the Medical Care and
have to pay for the liabilities arising from such injuries and if they could
Injury Services or MCIS levy including the Lifetime Care and Support
not, injured people could be left without recourse for their loss. This is
Authority (LTCSA) and the Motor Accidents Authority (MAA)) and GST.
why it is important that CTP insurance is compulsory.
The Scheme is regulated as required by the Motor Accidents
A person injured but not at fault in an accident can make a claim for a
Compensation Act 1999 and administered by the MAA.
range of benefits, including medical and related costs, past and future
economic loss, and, in the case of those whose injuries are greater
than 10% whole person impairment threshold, payments for ‘pain and
suffering’.
The Green Slip also provides some benefits for the at fault driver,
including the first $5,000 of expenses and access to the no fault
Lifetime Care and Support Scheme (LTCSS) for anyone who is
catastrophically injured. The Scheme also pays for all ambulance
and public hospital expenses irrespective of fault. Children under 16
years old are entitled to claim treatment, rehabilitation and care costs
regardless of fault.
Fast facts – NSW Compulsory Third Party Green Slip Scheme
2007
2012
Number of vehicles requiring Green Slips1
4.3 million
4.9 million
Annual premiums collected (ex GST)2
$1.3 billion
$1.8 billion
Number of claims (full and Accident Notification Forms)3
10,900
13,937
Number of claims per 10,000 vehicles4
25
29
Propensity to claim5
41%
52%
Average premium (all passenger vehicles ex GST)
$3136
$5187
Affordability8
28%
37%
Number of disputes (medical, assessment, court) per annum
7,283
7,370
Scheme efficiency – average 2000-20109
50%
1 Number of registered vehicles for the year ended 30 June
2 For the year ended 30 June from MAA annual report
3 Estimated ultimate number of claims (including claims incurred but not reported claims) for accident year ended 30 June
4 For the accident year ended 30 June, number of claims = ultimate number of claims from note 3
5 For the accident year ended 30 June, propensity to claim = ultimate number of claims from note 3 / number of road casualties
6 For the financial year ended 30 June 2007
7 From 1 February 2013, calculated from insurers’ latest rate filing approved by the MAA
8 Average passenger vehicle premium excluding GST as a percent of average weekly earnings
9 Average efficiency of the NSW CTP Scheme from 2000 to 2010
Page: 2
Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme
February 2013
2. Why the NSW Green Slip Scheme needs to change
The need to establish fault means the NSW CTP Scheme is essentially
Compensation can also be reduced if it is determined that the injured
adversarial. In general, the injured person must prove someone else
person was partially at fault in the accident. Many people take a long
was at fault to receive benefits. By comparison, the Victorian CTP
time to reach an agreement as to their future needs and entitlements,
Scheme is no fault and premiums are considerably less expensive.
only to have this amount reduced because they were considered
Every year, there are about 7,000 people who cannot access more
partly at fault. For many such people, their ongoing needs arising from
than the first $5,000 of benefits because they cannot prove the fault
injury are not met despite a protracted claiming process.
of another party. Their care and recovery may be compromised. This
Many of the payments made by insurers are not benefits to claimants.
includes drivers in single vehicle accidents.
These include medical assessments and legal costs.
In order to claim benefits, the injured person must lodge a claim with
Because of the complexity and adversarial nature of the Scheme,
the insurer of the vehicle most at fault and provide the insurer with
and because many claimants have never dealt with formal dispute
details of the accident, their injuries and losses.
resolution processes, many engage a lawyer to help them with their
Once all the details of the injury have been established, the insurer is
claim. The system deters unrepresented claimants.
required to make you an offer of settlement. There may be disputes
Since 1999, more has been spent on lawyers in the NSW Scheme
over liability, the extent and cause of injury and the settlement amount.
than on medical and related treatment costs (excluding care) for
The negotiation and dispute processes are often costly and protracted.
injured people. The complex system also dissuades many people from
In NSW, very little is paid to injured people in the first year after an
accident. Only medical expenses are paid on the way. Generally, the
making a claim in the first place, with only around half the people who
could make a claim actually doing so, while others may simply give up
majority of the compensation is paid out between three and five
or give in during the process, perhaps receiving sub-optimal benefits.
years after the accident. This means that unless severe hardship can
Fault-based schemes can be said to help uphold the principles of
be established, funds are not received by injured people when they
justice and fairness, by providing compensation for the wrongdoings
need it most and would be most effective in assisting with a quicker
of others and withholding benefits from those at fault. Some believe
recovery. Many disputes will end up in a formal assessment process
that this provides an incentive for people to drive safely, however
or in court, which is frequently very stressful for injured people,
because risk is effectively contracted out to the insurance company,
contributing to secondary injuries.
there is little evidence that the price of a Green Slip influences driver
There is little incentive for the injured person to get better. The
behaviour.
continuing need to prove disability or incapacity perversely discourages
Instead, as the case studies below show, the complex technicalities
quick recovery as this tends to equate to reduced payments, creating a
of the current Scheme lead to disputes and unnecessary costs and
lump-sum compensation mind-set.
delays, which do not help the injured person but increase Green Slip
premiums.
Case study:
A recently resolved claim from a an injured person hit by a car
incurred costs to the Scheme and the MAA of about $200,000 for
legal, investigation and assessment expenses. This is more than
the $160,000 the claimant was awarded. The claim took eight
years to resolve as there were five different medical disputes and
several review applications lodged, resulting in almost 30 medical
assessments and conferences.
Case study:
A motorcycle rider was involved in an accident due to the road
conditions. The rider sustained serious injuries. Under the current
fault based Scheme the rider was not entitled to recover damages
as there was no other at fault vehicle involved in the accident.
Investigation and legal costs by the insurer were around $30,000
defending against the claim to prove that the claimant did not
have a case. The claimant also spent an unknown amount on legal
expenses.
Case study:
An injured person lodged a claim four months late as the impact of the injuries was not immediately apparent. The insurer denied the claim
on the grounds that the explanation for the late claim was not ‘satisfactory’. An independent assessor from the MAA’s Claims Assessment
and Resolution Service (CARS) ultimately found a late claim could be made 18 months after the initial claim. The personal cost to the claimant
of the late claim dispute was $7,000 and the cost to the Scheme was $45,000. The total costs for this late claim amounted to over $50,000
simply to determine whether a claim can be made. This claim is still open.
Page: 3
Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme
February 2013
2.1 Green Slip prices are too high
Green Slip prices in NSW have increased significantly since 2008 and
Affordability is measured by comparing the cost of a Green Slip with
at present, the average Green Slip price is high compared to other
the average wages of a worker. When measured against average
Australian states and territories. Prices have risen by around 70% since
weekly earnings (AWE), the price of a NSW Green Slip has increased
2008.
from around 28% of AWE in 2007 to around 37% of AWE in 2013,
In part this is because benefits in NSW are comparatively more
compared to Victoria which is only 27% of AWE.
generous than some other states and territories.
Compared to other states, NSW is the least affordable jurisdiction.
However the affordability of a Green Slip in NSW is worse than in
NSW is marginally less affordable than South Australia which is
undertaking a major review of its CTP Scheme and is expected to
other states and territories.
reduce its prices dramatically.
40.0%
$600
$550
37 5%
37.5%
9% p.a.
$500
35.0%
Average premium -all passenger vehicles (LHS)
2013*
2012
2011
20.0%
2010
$200
2009
22.5%
2008
$250
2007
25.0%
2006
$300
2005
27.5%
2004
$350
2003
30.0%
2002
$400
2001
32.5%
2000
$450
Average premium - all passenger vehicles as % of Average Weekly Earnings (RHS)
*As at 1 February 2013 using latest insurer premium rate filings
Page: 4
Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme
February 2013
Premium affordability by state
% Avg Weekly
Underwriter
Benefits
Claims Management
37%
Private insurance
companies
Modified common law
Hybrid. Fault-based with no
fault for catastrophic injury,
under 16 years old and costs
under $5,000
Private insurance companies
$470
37%
Government
Common law with statutory
limits
Fault based
Outsourced
ACT
$526
32%
Private insurance
companies
Common law
Fault based
Private insurance companies
NT
$456
31%
Government
Statutory benefits
No fault
Government
VIC
$362
27%
Government
Statutory benefits plus
modified common law for
serious injury
No fault
Government
TAS
$319
26%
Government
Statutory defined benefits with
restricted common law rights
No fault
Government
QLD
$299
22%
Private insurance
companies
Modified common law
Fault based
Private insurance companies
WA
$247
16%
Government
Common law
Fault based
Government
State
Price ($)
NSW
$518
SA
Earnings
*CTP premiums quoted are for all passenger vehicles effective 1 February 2013 including levies and duties but excluding GST and ITC loadings.
Data has been sourced through jurisdiction agencies and a range of publicly available Scheme reports. Adjustments have been made to align the
comparisons on the same basis as feasible.
While NSW Green Slip prices have been impacted by decreasing
The CTP Scheme actuary’s independent cost estimates of the
returns on the funds, insurers need to invest because of the very
proposed Scheme design shows that the design will result in
low interest rate environment. Comparisons with other states
significant immediate savings and more stable and predictable claims
and territories show that other schemes are better designed and
costs over time. As a consequence this will lead to stable premium
performing better, even in the same difficult economic climate.
increases, more consistent with normal inflation, and increased
premium savings to vehicle owners over time compared to the
existing Scheme.
Page: 5
Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme
February 2013
2.2 The Scheme is highly inefficient
Over the last 10 to 15 years, the Scheme is proving to be excessively
collected by CTP insurers from vehicle owners since 1999 has
expensive to operate.
found its way to injured people. If additional legal costs (known
Since 1999, the proportion of dollars in the CTP Scheme (excluding
as contracted out legal costs) over and above the amounts payable
LTCSS) going to claimants has averaged at 50% of money collected1
from vehicle owners. That is, 50 cents from every single dollar
under regulated schedules are taken into account, the efficiency of the
Scheme is even more parlous.
Average NSW CTP Scheme Efficiency 2000 to 2010
Claim Payments
19%
Legal and
investigation costs
3%
50%
16%
Insurers' costs
MAA and RTA
expenses
12%
Profit
The main reasons for the inefficiencies are insurers’ expenses (such
Smaller claims whose total value is less than $50,000, particularly
as acquisition costs), higher than predicted profit margins because
those with legal representation, are the least efficient. The proportion
of the uncertain nature of the Scheme, and legal and other overhead
paid to the injured person in such cases, based on previous surveys,
expenses involved in negotiating and disputing settlements.
could possibly be less than 30% for legally represented claims under
When NSW CTP insurers lodge their prices with the MAA they
$50,000, if all legal costs are taken into account.3 The actual cash
estimate that if the current Scheme operated at full efficiency, there
in hand retained by the injured person is not known because these
would only be about 58 cents in the dollar for injured people. Even
arrangements are a private matter between the claimant and lawyer.
this current estimate of the NSW CTP Scheme efficiency is still low
Legally represented smaller claims have been responsible for most of
compared to other accident compensation schemes which typically
the increase in claims frequency in recent years. The number of CTP
return at least 65 cents in the dollar to injured people and often even
claims for minor severity injuries that involve legal representation have
more.2
increased by about 40% since 2008.
1, 2, 3
Ernst & Young, NSW CTP Scheme Performance Update, 2012
Page: 6
Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme
February 2013
2.3 Claim frequency and propensity are increasing
Increases in Green Slip prices have been put under further pressure
An increasing number of people with small claims are receiving
by claim frequency which has increased every year since 2008, after
payment for care and domestic assistance. The proportion of claim
many years of falling frequency. The increase in full claim numbers
costs directed to care is now almost as large as medical and related
(excluding not at fault claims up to $5,000) over four years has
costs – growing from 5% to 13% of claims payments over the last 11
exceeded NSW road casualties by 13%. The increase in claim numbers
years. This is also putting increasing pressure on Green Slip prices.5
disproportionately relates to minor injuries. 4
Given these trends, there is a real risk that the Scheme will become
Small claims are costing the Scheme proportionally more than they do
unsustainably expensive and fail to deliver a competitive and reasonable
in other state schemes, with resulting upward pressure on premium
price. Furthermore, the poor efficiency and increasing cost of minor
prices. Part of the problem is that the complex system of claiming and
injury claims calls into question the extent to which the Scheme is
negotiations is the same irrespective of the size of the final payment to
delivering effective support and care to those who need it most.
10
0%
0
Claims per 10,000 vehicles
10%
20012
20
20011
20%
20010
30
20009
30%
20008
40
20007
40%
20006
50
20005
50%
20004
60
20003
60%
20002
70
20001
70%
20000
Propensity to Claim
the individual.
Accident Year ending 30 June
Propensity to claim = Number of full claims and ANFs / Road casualties (LHS)
Claims frequency = Number of full claims and ANFs / registered vehicles (RHS)
Case study:
A pedestrian was knocked down while walking on the footpath. The claim took more than five years and numerous doctors’ appointments
before it was resolved. The total damages awarded were $6,000 for past treatment. Legal and investigation costs amounted to about
$50,000 during the course of the protracted claim. Further costs of almost $10,000 were incurred by the MAA for multiple assessments
and settlement conferences. On top of the $60,000 in costs to the Scheme, the claimant would also have paid their own legal costs for just
$6,000 to recoup medical expenses.
4, 5
Ernst & Young, NSW CTP Scheme Performance Update, 2012
Page: 7
Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme
February 2013
2.4 Delayed payment of benefits
The NSW CTP Scheme typically makes the majority of payments
In the Victorian Transport Accident Scheme, significantly more is
three to five years after the injury, which is significantly later than
paid out within the first two years (approximately 30% of all claims
other schemes. The following graph compares the cash flow profile
payments occur in the first two years post-injury) than the NSW CTP
between the NSW CTP Scheme and Victorian Scheme in a given
Scheme. In NSW the majority of benefits (approximately 52%) are
accident year.
paid between three to five years after the accident.
Percentage of claims cost paid out
25%
20%
15%
10%
5%
0%
0
1
2
3
4
5
6
7
8
9
Development Year
NSW
Victoria
Case study:
A claim involving moderately severe injuries has been running for more than a decade and has involved almost 30 conferences, medical
assessments and reviews as most decisions have been challenged, despite the findings of whole person impairment of between zero and
5%. The insurer has spent $130,000 to date and the MAA has spent more than $12,500 on assessments. The injured person has also spent
an unknown amount on legal expenses.
2.5 NSW compared with other states
Because some jurisdictions have much lower benefits, it is likely that
some states will always be more affordable than NSW. The objective
for reform does not involve NSW reducing its benefits to the lowest
common denominator.
The experience in other states shows that it is possible to operate no
fault schemes much more effectively and efficiently.
Case study:
The Transport Accident Scheme in Victoria has operated
since 1974 and has been managed by the Transport Accident
Commission (TAC) since 1986. The Victorian scheme is
essentially a no fault scheme. This means that medical and nonmedical expenses are paid to all those injured in a motor vehicle
accident - regardless of who caused the accident. For those
The development of a National Injury Insurance Scheme shows
who are more seriously injured, access to the common law is
that the national trend is towards no fault type schemes, and the
available. Lost income payments are made fortnightly and other
Productivity Commission has concluded that no fault schemes are
expenses are paid as they are incurred.
overall superior to fault-based schemes.
“Overall, no fault systems are likely to produce generally superior
The Victorian Transport Accident Act 1986 guides the TAC in the
types of benefits it can pay and any conditions that apply.
outcomes compared with fault-based systems. This assessment is
consistent with the findings and recommendations of past official
inquiries and reports that have investigated the matter.”6
6
Productivity Commission Disability Support and Care Report, 2011 p. 849
Page: 8
Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme
February 2013
3. Moving to a better Scheme
After considering the deterioration in performance of the NSW Green
benefits for anyone injured in a motor accident, irrespective of fault,
Slip Scheme, the NSW Government has decided to implement a fairer,
similar to the Victorian approach. The Government will retain common
yet more affordable system.
law for injured people whose whole person impairment is greater
The reformed Green Slip Scheme will provide defined statutory
than 10%.
3.1 Principles for reform
The principles for reform are:
 Health outcomes are optimised when injured people are assisted as soon as possible.
 A simpler and less adversarial claiming process that encourages early resolution and reduces Scheme costs particularly the need for legal
expenses.
 Faster resolution of claims leads to reduced risk for insurers, enabling lower prices, lower and more certain profit margins with fewer
opportunities for super-profit.
 Improving the predictability of benefits assists claimants and insurers.
 Lower overheads for insurers and better competition in the Green Slip market will deliver price reductions.
 Consistency of administration, benefits and dispute resolution mechanisms across NSW compensation Schemes is desirable.
 Comparability with motor accident compensation schemes in Australia and particularly with these schemes in eastern seaboard states is
desirable.
 Consistency of administration, benefits and dispute resolution with the National Disability Insurance Scheme is desirable.
3.2 Universal cover
3.3 First party cover
A no fault Scheme will deliver better support for injured people,
At present, a not at fault claimant needs to claim against the vehicle at
through a fundamental shift away from an adversarial system to
fault. This means dealing with someone else’s insurer who may not be
one focused more on recovery outcomes for all those injured on our
motivated to look after the claimant as they would their own customer
roads. Universal cover means more than 7,000 additional people
– indeed, in the adversarial system, they are actually representing
are eligible to access benefits. This will be offset by a considerable
the at fault driver, not the claimant. As the injured person is generally
reduction in technical legal disputes over fault, liability and contributory
not the insurer’s customer, there is little incentive for the insurer
negligence that add to cost and denial of benefits (even in instances of
to perform well on claims and resolve them in the interests of the
a momentary lapse of concentration or technical error on the road).
claimant.
By extending benefits regardless of who was at fault, the costs borne
Under the new Scheme, those injured will bring their claim to their
by the community of supporting at fault drivers will be met by the
insurer – just like comprehensive motor insurance – without the
Scheme, without removing the capacity for them to be punished
complication of needing to work out who the liable insurer is.
through the normal police and judicial systems.
This will improve an insurer’s focus on customer service and means
Consistent with most no fault schemes, in serious cases of
that the insurance company the claimant chooses is no longer a
negligence, criminal activity, intoxication or self- harm, access to
matter of luck, enhancing competitiveness among insurers. Insurers
benefits would still not be permitted.
will share costs in a shared clearing house so the vehicle at fault still
pays – again just like comprehensive insurance.
Only in cases where someone is injured outside of a vehicle, such as a
pedestrian or cyclist, or where they are eligible to make a common law
claim, will they continue to claim against the at fault vehicle.
Page: 9
Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme
February 2013
3.4 Payments made sooner, based on
need
3.6 Common law will be retained for
some
Insurers will be able to settle claims quickly once all the facts and
Limited common law rights will be retained for those with injuries
benefits are agreed. Using defined benefits, insurers will pay claimants
which meet the current greater than 10% whole person impairment
their lost earnings or other expenses on a fortnightly benefit system,
threshold. Retention of common law for these people maintains
so the funds are received when they are needed – for example, to
the principles of compensation for those who genuinely have the
pay the rent or mortgage, and maintain basic living standards – with
remainder of their life affected through no fault of their own.
a capacity to convert the claim once the injured person’s injuries are
While this retains some level of dispute cost within the Scheme, those
stabilised.
who receive these types of injuries should be, within the limits of
Where applicable, payments will mirror NSW workers compensation
what the Scheme can afford, compensated for their permanent loss.
provisions for lost earnings, including capped lost earnings thresholds,
For people with less serious injuries, the argument is less compelling
meaning that injured people will be paid close to their pre-injury
since they will usually have every prospect of a return to health and/or
earnings in the first few months after their accident.
a return to work, and their injuries are better dealt with in a simple and
The new Scheme will borrow design elements from both the NSW
less adversarial claims system.
Workers Compensation System, and from the Transport Accident
Commission (TAC) model in Victoria. Both schemes make payments
to injured people within weeks although capped so that very high
income earners are not being subsidised by the rest of the community.
Care payments will be based on need and provided commercially.
Taking this approach will move NSW closer to a model in which
people are being treated according to their need, rather than how and
where they acquired their injury.
3.7 A simpler Scheme with fewer
disputes
A no fault, statutory defined benefits Scheme will be easier for
injured people to use and will reduce the need for disputes about
entitlements.
Fewer disputes will mean less delay, and less need for injured people
to seek legal assistance.
3.5 Simpler claims system
A better dispute resolution system will be adopted. Injured parties
A simpler claims process will be introduced. Injured people will only
instance.
need to make a simple notification of the accident to get into the
system, just like the NSW Workers Compensation Scheme and the
TAC. The current distinction between an early accident notification and
a full claim will be removed. Insurers will simply gather information
from injured people when they need it, and only what they need,
instead of using a complex, one-size-fits-all claim form.
will be encouraged to resolve disputes with the insurer in the first
Disputes that cannot be resolved may need to go through formal
review. Where possible, most disputes will be resolved by an
independent review processes.
It will be a streamlined system with the following safeguards:
• The role of the MAA will be strengthened by giving it new
Insurers will be encouraged to adopt a streaming approach to claims
powers to set guidelines, and to monitor and take action against
management, with proactive support given to people with claims for
insurers failing to comply.
lost and future earnings to help them rehabilitate to the workforce, just
• Insurers will have their licence conditions linked to their
like TAC in Victoria.
performance in managing claims effectively and insurers and
This approach means that a worker injured on our roads will gain
lawyers will be subject to a Code of Conduct that will reinforce
assistance to return to the workforce. Although employers don’t
model principles of behaviour.
have the same duty of care to employees injured in a motor vehicle
accident as they would if the person is injured in the workplace, the
experience in Victoria shows that a win:win outcome can be achieved
for employers and employees by taking a more proactive approach to
rehabilitation and return to work.
People outside of the workforce, or with no real prospect of returning
to work, will be looked after by specialist teams who will help with
recovery and rehabilitation pathways to maximise quality of life for
these people, similar to the Victorian model.
• The MAA will continue to provide a claims assistance service for
claimants.
• As an incentive to manage claims adequately, insurers will not
be permitted to charge vehicle owners in their premiums for the
cost of disputes where the claimant is successful – these will
need to be funded from their own profit.
• As a further safeguard, claims assessors will be required to
approve all offers of settlements or commutations made to
unrepresented claimants.
• An independent review officer role will be established, similar to
that operating in the Workers Compensation System.
Page: 10
Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme
February 2013
3.8 Some reform to premiums needed
Moving to a no fault Scheme will require a review of the premium
3.9 Lower Green Slip premiums and
better outcomes
system, to ensure that affordability and equity are maintained. This
The proposed reforms are expected to result in:
is because in a no fault Scheme risk exposure is different to the
risk profile within an at fault Scheme, and there would need to be
adjustments to the cross subsidisation between groups of vehicle
owners.
The powers of the MAA will be strengthened to ensure premiums
remain efficiently priced.
The Government will also take the opportunity to look at how to
streamline the premium system and improve purchasing processes
(for example, by integrating better with the registration process).
Market reforms to enhance competition with insurers will also be
pursued.
The Government also recognises that the MCIS levy is an
important part of the Green Slip premium and will be reviewing the
administrative costs and funding model of the MAA and LTCSA under
the levy.
• Significant premium reductions on 2013 prices, although actual
savings for individuals will vary by vehicle class and risk factor,
and could be more for some people. Special legislative provisions
will be adopted to ensure insurers deliver on the price savings in
the short term.
• Premiums becoming more affordable as a percentage of average
weekly earnings.
• A significantly greater proportion of funds being paid to injured
people earlier instead of going to legal and investigation costs,
insurer overheads and excess profits.
• Improved experience by injured people and a focus on better
health outcomes.
• All injured road users being covered including those who might
be at fault.
• A considerable stabilisation in future price increases:
o Future expenses being more predictable, meaning less need
for insurers to estimate conservatively.
o Less risk, meaning lower profit margins for insurers to reflect
this risk when they lodge their prices with the MAA.
o Reduced uncertainty, which will help reduce the risk of insurer
profit windfalls caused by unpredictability of claims payouts
and the need for insurers to price prudently.
o Reduced size and length of time for funds to be reserved
by insurers, which will lessen the impact of interest rates on
premiums.
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Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme
February 2013
4. Who will benefit from the changes?
4.1 Injured people with greater than
10% whole person impairment
4.2 Other injured persons
All persons who currently exceed the 10% whole person impairment
The system will be less adversarial and provide assistance to return to
threshold can still access common law rights, if not at fault, and will
All other injured people will access benefits sooner, when they need it.
work and/or health, while their interests are safeguarded by a range of
see better outcomes than at present.
measures.
One difference will be that future economic loss caps will mirror NSW
The need to engage lawyers that can impact on a proportion of the
workers compensation caps, but this restriction will only really be felt
by high income earners who would reasonably be expected to have
other sources of protection such as income protection insurance and
final payment is removed but with clearer entitlements and safeguards
to protect their interests. Benefits will flow quickly and the person
with minor injuries can get back to enjoying their life as soon as safely
disability insurance.
possible.
In addition, seriously injured people at fault will now access benefits
In addition, injured people at fault will now access benefits above
for the first time. This will overcome the anomaly, for example, that
people in Lifetime Care and Support Scheme who are not at fault can
$5,000 for the first time.
claim for benefits under CTP not available to other participants who
4.3 Vehicle owners
are at fault.
The vehicle owners of NSW should expect that the Scheme they
fund will aim to benefit the maximum number of people to the
maximum extent possible, without excessive overheads, and with
more affordable premiums that are competitive with premiums in
other states.
5. Next steps
These reforms are significant, and the MAA will need to consult with
Claims under the current Scheme will continue to be dealt with under
stakeholders to guide the final shape of legislation, regulations and
the current arrangements, though the transitional provisions of the
guidelines.
legislation will enable conversion to the new Scheme.
The exact timetable for reform will be determined in consultation with
Refer to the Motor Accidents Authority website www.maa.nsw.gov.au
insurers, recognising the considerable operational changes that will be
for further information.
involved.
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Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme
February 2013
6. Summary of proposed reform
Reform Area
Current Scheme
Proposed Reform
New Scheme Experience
Statutory defined benefits for all
Appropriate cost-efficient benefits
Common law benefits for all
injuries.
design and delivery for different
injuries sustained by not at fault
Access to common law retained
injury types and severities.
claimants
for serious injuries (greater than
A measurably higher efficiency
10% whole person impairment).
ratio.
Regular payments to cover
medical, rehabilitation and
related costs, and reasonable
(non-gratuitous) care payments
(converted to a lump sum after
stabilisation) for those with
ongoing treatment and support
Single lump sum payment
covering all past and future loss
Scheme inefficient and
at settlement (but medical paid as
adversarial
incurred to this point)
Long time to pay benefits
requirements.
Lost income according to
work capacity and functional
assessment capped as in NSW
workers compensation and
Expeditious and health outcome
oriented Scheme that delivers
optimal benefits and is focussed
on assisting injured people to
achieve the best possible recovery
from their injuries.
Consistent and equitable benefits
provided to injured people with
similar injury types and severity
levels.
converted to a lump sum for those Benefits design sufficiently flexible
to provide for the spectrum of
with ongoing incapacity.
Lump sum payment for permanent
impairment (on a sliding scale and
needs of people with minor to
severe injuries.
based on an impairment threshold).
Measures to streamline the
experience for claimants including
Complex and protracted procedure less complex system entry
for injured people to lodge a claim procedures and improved support
The system is ‘easy to navigate’
for which they frequently engage a mechanisms for claimants.
incentive for injured people to
lawyer
obtain legal advice.
Simpler and more accessible
and user-friendly, reducing the
alternative-to-court dispute
resolution services.
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Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme
February 2013
Benefits coverage focused mainly
on injured people not at fault
and need to establish fault and
contributory negligence
Statutory defined benefits
No need to establish fault before
extended to all injured persons
benefits are paid; the community
regardless of fault (except in
is assured that the needs of those
serious cases of negligence or
who are injured on the roads are
self-harm).
met.
Only common law lump sum
Need to establish fault
payments affected by degree of
All benefits reduced by degree of
fault, which will be set by schedule
blame attributed to claimant by
to remove disputes.
assessor / judge
Provision of clearer definitions
around what is classified as
contributing to fault.
Appropriate benefits for different
injury types and severities with
maximum flexibility for those with
the more severe injuries, without
having to wait several years for
benefits to be paid.
Measures to reduce overhead
costs, streamline purchasing and
reduce red tape in the Scheme,
Lower overheads passed onto
including:
• increased flexibility around
pricing for insurers
• simplified premium setting
regulations
Cumbersome market practice
and premium regulation
Significant insurer costs
• capacity for single transaction
for purchase of registration and
Green Slip
• improved electronic transactions
• allow sub-licences for niche
markets
• addressing acquisition activities
vehicle owners in lower Green Slip
prices, with fewer opportunities for
excessive profits.
Greater choice in Green Slip pricing
for motorists in certain markets
Easier registration and Green Slip
transaction.
Increased flexibility for insurers to
write risk in selected markets
Some vehicle owners’ groups may
get better deals more suited to
their risk.
• reviewing administrative costs
and funding model of the MAA
and LTCSA under the MCIS levy.
Page: 14
Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme
February 2013
Catalogue No. MAA07
Motor Accidents Authority, 580 George Street, Sydney, NSW 2000
1300 137 131 | 02 8267 1900
Website maa.nsw.gov.au
ISBN 978 1 921422 29 4 © Copyright MAA NSW 2013